Kenya Greenmaster Fresh Business Plan — Working Capital, Funding and the Balance Sheet

Peak working capital of US$6.96m, the receivables facility scaling to US$4.2m, and why grower payment precedes buyer settlement.

Working Capital, Funding and the Balance Sheet

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8.1 Why working capital is the binding constraint
8.2 The unfunded gap
8.3 The revenue authority as an unfunded creditor
8.4 Funding structure
8.5 Balance sheet

8.1 Why working capital is the binding constraint

Figure 13. Monthly cash balance and working capital absorbed.

The cash line is the most important chart in this document. The company is profitable from month 15 and never accumulates cash, because every additional dollar of gross profit is immediately consumed by the receivables and inventory required to generate the next dollar. Growth in this sector is not funded from earnings. It is funded from the balance sheet, and when the balance sheet runs out, growth stops — which is a manageable outcome, provided it is planned for rather than discovered.

8.2 The unfunded gap

Figure 14. Peak working capital against the receivables facility available.

US$ million	FY2027	FY2028	FY2029	FY2030	FY2031
Trade receivables at 45 days	0.37	1.23	2.43	3.60	4.64
Inventory and produce in transit	0.15	0.49	0.95	1.39	1.80
Value added tax refund receivable	0.17	0.41	0.67	0.84	0.95
Less grower payables at 12 days	(0.03)	(0.08)	(0.16)	(0.23)	(0.29)
Working capital employed	0.66	2.05	3.89	5.60	7.10
Peak working capital absorbed	0.53	1.91	3.75	5.47	6.96
Receivables facility available at peak	0.33	1.13	2.24	3.31	4.25
Unfunded gap	0.20	0.78	1.51	2.16	2.71

A facility advances against invoices, and most of this working capital is not an invoice

The unfunded gap is the reason this business needs equity at all. A receivables facility advances against approved invoices to European customers at 80 per cent of face value. It does not advance against produce in a cold room, against avocado in transit for 34 days, against input credit extended to growers, or against a value added tax refund the revenue authority has not yet paid. Those items are real, they scale directly with revenue, and they must be funded with permanent capital. The asymmetry in the payment cycle compounds it: European customers pay at 45 days and smallholders must be paid within 12, so the company funds a 33-day gap on every kilogram it handles, and that gap widens in absolute terms with every hectare contracted.

8.3 The revenue authority as an unfunded creditor

Figure 15. Value added tax refund receivable at a 210-day recovery lag.

Exports are zero-rated for value added tax, so input VAT on packaging, inputs, utilities and services is fully recoverable. Recovery in practice lags. At the modelled 210-day refund period the receivable reaches US$0.95m at peak — about 16 per cent of the equity raised, lent interest-free to the tax authority for the life of the business. It is modelled as permanent working capital rather than as a timing difference, because at a steadily growing revenue base it never unwinds.

8.4 Funding structure

Figure 16. The three funding layers and what the equity funds.

Layer	Amount	Purpose	Why this instrument
Equity	US$6.0m	Early trading losses, the prepared line, and the working capital the facility cannot reach	Loss-absorbing capital for risks that cannot be secured against an asset or a receivable
Development bank term loan	US$3.0m	Packhouse fit-out, cold chain and vehicles	Long-dated asset finance at 8.5% over 7 years with 18 months of principal grace, matched to asset life
Receivables facility	to US$4.2m	The trade cycle between shipment and customer payment	Self-liquidating and revolving. Advances at 80% against approved European receivables at 11.5%

The equity layer is deliberately the smallest of the three relative to what it funds. That is not a preference for leverage; it is a consequence of the returns. A business generating a 9.4 per cent EBITDA margin cannot service a large equity base at the cost of equity that equity investors require. Matching long assets to long debt and the trade cycle to self-liquidating debt is what makes the equity return tolerable at all.

Application of equity proceeds	US$ million	Share
Working capital gap not covered by the receivables facility	2.05	34%
Prepared and high-care line, net of term loan allocation	1.42	24%
Early trading losses to EBITDA breakeven	1.10	18%
Outgrower recruitment, input credit and certification build	0.78	13%
Contingency	0.65	11%
Total	6.00	100%

Roughly 53 per cent of the equity funds working capital and losses rather than assets. An investor in this business is principally funding a receivables book and a grower payment cycle, not a factory. That should be understood at the outset, because it determines what the money can and cannot be recovered from if the plan disappoints.

8.5 Balance sheet

US$ million, at year end	FY2027	FY2028	FY2029	FY2030	FY2031
Packhouse, cold chain and vehicles, net	1.56	3.61	3.84	4.00	3.73
Trade receivables	0.37	1.23	2.43	3.60	4.64
Inventory and produce in transit	0.15	0.49	0.95	1.39	1.80
Value added tax refund receivable	0.17	0.41	0.67	0.84	0.95
Cash	5.45	0.70	-0.08	0.09	1.14
Total assets	7.70	6.44	7.81	9.92	12.26
Share capital	6.00	6.00	6.00	6.00	6.00
Retained earnings / (accumulated deficit)	(1.33)	(2.42)	(2.42)	(1.26)	0.63
Total equity	4.67	3.58	3.58	4.74	6.63
Development bank term loan	3.00	2.73	2.18	1.64	1.09
Receivables facility drawn	0.00	0.05	1.89	3.31	4.25
Grower and trade payables	0.03	0.08	0.16	0.23	0.29
Total liabilities	3.03	2.86	4.23	5.18	5.63
Total equity and liabilities	7.70	6.44	7.81	9.92	12.26
Gearing	39.1%	43.7%	53.2%	51.1%	44.6%

Figure 17. Balance sheet — asset composition.

The asset composition makes the plan’s own argument. Net fixed assets peak at US$4.00m in FY2030; receivables, inventory and the tax refund together reach US$7.65m by FY2031 and overtake them from FY2029. Total equity falls from US$6.00m at inception to a low of US$3.58m at the end of FY2028 and holds there through FY2029 before recovering to US$6.63m, and gearing peaks at 53.2 per cent in FY2029 — the point at which the supply base is expanding fastest against the thinnest earnings.

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Next section9. Sensitivity and Scenario Analysis